M/S MAGADH SUGAR & ENERGY LTD v. THE STATE OF BIHAR & Ors.

levy duty on the sale of electricity to an intermediary distributor. The question of whether the appellant is liable to file returns under Sections 6(B)(1) and 5A of the Act is directly related to the issue of whether the sale of electricity by the appellant to BSEB falls under the charging provisions of Section 3(1). The questions raised by the appellant can be adjudicated without delving into any factual dispute. Thus, the present matter is amenable to the writ jurisdiction of the High Court. The High Court made an error in declining to entertain the writ petition. The judgment of the High Court is set aside. The writ petition is restored to the file of the High Court for fresh determination. [Para 24, 25][305-G-H; 306-A-B] State of AP v. National Thermal Power Corporation Ltd. (2002) 5 SCC 203 : [2002] 3 SCR 278; Raza Textiles Ltd. v. ITO (1973) 1 SCC 633; State Trade Corporation of India Ltd. v. State of Mysore AIR 1963 SC 548: [1963] SCR 792; Radha Kishan Industries v. State of Himachal Pradesh (2021) SCC OnLine SC 334; Whirpool Corporation v. Registrar of Trademarks, Mumbai (1998) 8 SCC 1 : [1998] 2 Suppl. SCR 359; Harbanslal Sahni v. Indian Oil Corporation Ltd. (2003) 2 SCC 107; Radha Krishan Industries v. State of Himachal Pradesh & Ors. (2021) SCC OnLine SC 334; Assistant Commissioner of State Tax v. M/s Commercial Steel Limited Civil Appeal No. 5121 of 2021; State of HP v. Gujarat Ambuja Cement Ltd. (2005) 6 SCC 499 : [2005] 1 Suppl. SCR 684; Executive Engineer v. Seetaram Rice Mill (2012) 2 SCC 108 : [2011] 15 SCR 211; Union of India v. State of Haryana (2000) 10 SCC 482; Sree Meenakshi Mills Ltd. v. Commissioner of Income Tax AIR 1957 SC 49 : [1956] SCR 691 - referred to. Case Law Reference [2002] 3 SCR 278 (1973) 1 SCC 633 [1963] SCR 792 referred to referred to referred to Para 13 Para 15 Para 15 A B C D E F G H M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF BIHAR & ORS. 287 [1998] 2 Suppl. SCR 359 referred to (2003) 2 SCC 107 referred to [2005] 1 Suppl. SCR 684 referred to [2011] 15 SCR 211 (2000) 10 SCC 482 [1956] SCR 691 referred to referred to referred to Para 19 Para 19 Para 19 Para 19 Para 21 Para 23 A B CIVIL APPELLATE JURISDICTION: Civil Appeal No.5728 of

#2021. From the Judgment and Order dated 18.09.2017 of the High Court of Judicature at Patna in Civil Writ Jurisdiction Case No.4300 of 2015. C S. K. Bagaria, Sr. Adv., Praveen Kumar, Kumar Ajit Singh, Ms. Sunaina Kumar, Advs. for the Appellant. Saket Singh, Mrs. Niranjana Singh, Advs. for the Respondents. The Judgment of the Court was delivered by DR DHANANJAYA Y CHANDRACHUD, J.

#1. Leave granted.

#2. This appeal arises out of the judgment of a Division Bench of the Patna High Court dated 18 September 2017. The High Court declined to entertain the writ petition instituted by the appellant on the ground that the dispute between the parties is factual in nature and is suitable for adjudication in terms of the statutory remedy provided in the Bihar Electricity Duty Act 19481. The appellant had invoked the writ jurisdiction of the High Court to challenge the imposition of electricity duty and penalty on the electricity that it was supplying to Bihar State Electricity Board2. Facts of the case

#3. The appellant is a sugar mill company operating in Narkatiaganj, Bihar. It is engaged in the business of manufacture and sale of white crystal sugar. The waste of sugarcane (bagasse) produced in the process of manufacturing sugar is used for the production of electricity for its 1 "Bihar Electricity Act'' or “the Act” 2 "BSEB'' D E F G H 288 SUPREME COURT REPORTS [2021] 9 S.C.R. A own consumption and the surplus energy is supplied to BSEB. The appellant has been supplying electricity to BSEB since 6 March 2008. B C D E F G

#4. The Bihar Electricity Duty Act 19483 in its initial form empowered the State Government (the first respondent) to levy electricity duty under Section 3 (1) on the units of energy consumed or sold, excluding the losses of energy in transmission and transformation at the rates specified by the first respondent. Rates of duty were specified in the Schedule to the Act. The Bihar Electricity Act was amended in 2002 which led to the deletion of the Schedule and amendment of Section 3(1). The amendment allowed the first respondent to levy tax on the basis of the units or the value of energy consumed or sold at rates specified by the State Government by a notification. Section 3 (1) in its current form provides as follows: “3. Incidence of duty-(1) Subject to the provisions of sub-section (2), there shall be levied and paid to the State Government, either on the units or on the value of energy consumed or sold, excluding losses of energy in transmission and transformation, a duty at the rate or rates to be specified by the State Government in a notification. Provided that, the State Government may, by notification, specify different rates of duty in respect of different categories of consumption or sale of energy. Provided further that, the rate of duty shall not exceed twenty paise per unit incase the duty is levied on the basis of units consumed or sold and ten percentum of the value of the energy consumed or sold in case the duty is levied on the basis of the value of energy. (2) No duty shall be leviable on units of energy- (a) consumed by the Government of India, or sold to the Government of India, for consumption by that Government. (b) consumed in the construction, maintenance, or operation of any railway company operating that railway, or sold to that Government or any such railway company for consumption in the construction, maintenance or operation of any railway. H 3 "The Act'' M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF BIHAR & ORS. [DR DHANANJAYA Y CHANDRACHUD, J.] 289 (c) consumed by the licensee in the construction, maintenance and operation of his electrical undertaking. A (d) consumed by or sold by any class of persons exempted from payment of duty under section 9. (e) consumed by the Damodar Valley Corporation for the generation, transmission or distribution of electricity by that Corporation. (f) consumed for any purpose which the state Government may, by notification, in this behalf declare to be a public purpose and such exemptions may be subject to such conditions and exemptions if any, as may be mentioned in the said notification. (3) when a licensee holds more than one licence, duty shall be payable separately in respect of each license.” (emphasis supplied)

#5. In pursuance of its power under Section 3(1) of the Act, the first respondent issued a notification dated 21 October 20024 which stipulated that the rate of duty applicable on the consumption or sale of electricity would be fixed at six per cent of the value of energy consumed or sold for any other purposes other than irrigation. The notification was amended by another notification dated 4 March 20055 which provided that the rate of duty to be levied on consumption of electrical energy generated by captive power plants would be six per cent of the value of energy, which shall be equivalent to the energy tariff as fixed by the BSEB. It is also relevant to note that a notification dated 14 January 20116 was issued by the first respondent exercising its powers under Section 9 of the Act7 granting a blanket exemption from payment of electricity duty on electricity generated by captive plants for self- consumption.

#6. The appellant through the Bihar Sugar Mills Association challenged the notifications dated 21 October 2002 and 4 March 2005 in the High Court by filing a writ petition8. The High Court by its judgement 4 SO 137 5 SO 14 6 SO 1 7 Power of the State Government to grant exemption from the duty payable under this Act. 8 CWJC No 13614 of 2006 B C D E F G H 290 SUPREME COURT REPORTS [2021] 9 S.C.R. A B C D E F G H dated 16 September 2009 struck down the notifications and the amendment to Section 3 (1) of the Bihar Electricity Act on the ground that there were no guidelines in the statute or the notifications for construing the expression ‘value of energy’. The relevant extract of the judgment is reproduced below: “19. In view of the above discussion, the amendment of Section 3 (1), so far as it provides for payment of duty “on the value of energy” is liable to be struck down as there is no guideline provided in the statute as to in which case the duty will payable calculated on the basis of the value of energy consumed or sold. Similarly the notification dated 21.10.2002 providing for payment of duty at 6 per centum of the value of energy is liable to be quashed as there is no guidelines provided for the ascertaining the value of energy. The subsequent Notification SO no. 14 dated 04.03.2005 is also liable to be struck down on the self-same ground. Since the amendment as the notification is found to be inoperative, it is obvious that the duty will be payable as per the schedule which was in vogue by virtue of the Bihar Electricity (Amendment) Act, 1993.”

#7. The first respondent aggrieved by judgment of the High Court filed a special leave petition9 before this Court. While the matter was pending before this Court, the first respondent amended the Act through the Bihar Finance Act 2012 with retrospective effect from 17 October 2002 for defining the term ‘value of energy’. Consequent to the insertion of Section 2 (ee) in the Act, the expression reads as follows: “(ee) ‘value of energy’ – (i) in case of energy sold to a consumer by a licensee or by any person who generates energy, means the charges payable by the consumer, to the licensee or to any person who generates such energy, for the energy supplied by such licensee or person, as the case may be; but it shall not include the following charges, namely — (1) Meter charges (2) Interest on delayed payment 9 Consequent to the grant of special leave, it was converted to Civil Appeal No 2570 of 2010. M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF BIHAR & ORS. [DR DHANANJAYA Y CHANDRACHUD, J.] 291 (3) Fuse-off call charges and reconnection charges: Provided that where no energy has been consumed by a consumer, minimum charges payable by him shall not deemed to be the value of energy: Provided further that where the units of energy actually consumed by a consumer are less than the units of energy for which prescribed minimum charges are payable, the value of energy shall, in the case of such consumer, mean the charges for the units of energy actually consumed by him and not the prescribed minimum charges: (ii) in case of energy consumed by the person generating such energy, means the charges payable by any other consumer for such quantum of power to the Bihar State Electricity Board constituted under section 5 of the Electricity (Supply) Act, 1948 (Act 54 of 1948) in respect of energy supplied by the Bihar State Electricity Board within the area where the consumer is located;” (emphasis supplied) The appellant challenged the amendment by invoking the writ jurisdiction10 of the High Court. The petition is pending.

#8. On 3 January 2015, the fourth respondent issued a notice to the appellant for its failure to file returns under Section 6B (1) of the Act, concealment of the sale of electricity of approximately Rs 56 crores and for raising a demand of electricity duty and penalty of about Rs 67 crores. The notice was issued on the basis of the report dated 24 December 2014 of the Accountant General (Audit) Bihar. In its reply dated 5 February 2015, the appellant contended that no tax can be levied on the supply of electricity by the appellant to BSEB for the following reasons: (i) Under Section 3 of the Act, tax is levied on the ‘value of energy’. Section 2(ee) only brings the sale to a consumer within the ambit of the phrase ‘value of energy’; (ii) BSEB is a ‘licensee’ and not a ‘consumer’ in view of the definition of ‘licensee’ provided under Section 2(d) of the Act; and 10 CWJC No 11126 of 2012 A B C D E F G H 292 SUPREME COURT REPORTS [2021] 9 S.C.R. (iii) The resolution dated 12 September 2006 issued by the first respondent announced various incentives for establishment and development of sugar and other allied industries including exemption from payment of electricity duty for cogeneration for five years.

#9. The definition of the term ‘consumer’ has a bearing on the present appeal since the appellant has argued that the term ‘value of energy’ used in Section 3 for the levy of tax is not applicable to it because the definition of ‘consumer’ excludes a licensee. The term ‘consumer’ has been defined in Section 2 (b) of the Bihar Electricity Act in the following terms: “(b) ‘consumer’ means any person who is supplied with energy but does not include either a licensee or the ‘distributing licensee’ as described in clause1 (a) of clause IX of the Schedule to the [3] Indian Electricity Act, 1910 (9 of 1910), or a person who obtained sanction under section 28 of the said Act.” (emphasis supplied) The appellant supplies electricity to BSEB which is undertaking the business of distributing electricity. The appellant is not supplying electricity to any other person. Thus, the appellant has submitted that it cannot be charged electricity duty under Section 3 (1) of the Bihar Electricity Act for supplying electricity to a licensee.

#10. On 8 February 2015, the Assistant Commissioner of Commercial Tax, Bettial rejected the objection raised by the appellant and passed an assessment order confirming the demand of electricity duty and penalty of about Rs 67 crores on the following grounds: (i) It has been conceded by the appellant that it sells electricity in excess of its consumption. Duty is levied on every sale of electricity; and (ii) The notification dated 14 January 2011 only exempts the energy generated by a Generator or Captive Power Plant for self- consumption.

#11. Notices of demand dated 14 February 2015 were issued to the appellant demanding electricity duty and penalty for 2010-11, 2011- A B C D E F G H M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF BIHAR & ORS. [DR DHANANJAYA Y CHANDRACHUD, J.] 293 12 and 2012-13. Challenging the notices, the appellant filed a writ petition11 before the High Court praying for the following reliefs: A “For quashing the notices dated 14.2.2015 issued to the Petitioner raising demand for payment of duty and further that the Petitioner is not liable to file return as the provision of Section 6B(1) and 5A of the Act is not attracted in the case of the Petitioner and was not liable to pay electricity duty on supply of electricity to the Bihar State Electricity Board.”

#12. In the meantime, National Thermal Power Corporation Limited12 had filed a writ petition13 before the High Court challenging the imposition of electricity duty on its supply of electricity to various electricity boards including BSEB. NTPC was supplying electricity exclusively to the Electricity Boards. On 2 December 2015, the High Court passed an order tagging the writ petitions filed by the appellant and NTPC on the ground that the issue raised in both the petitions was substantially similar. Thereafter, on 20 October 2016, the High Court de- tagged the writ petitions holding that the matters are not similar since NTPC is a power generation company, while the appellant is a company which runs a sugar mill and also generates electricity from molasses. The relevant portion of the order is extracted below: “On an examination of the facts of the present matter as also of the other two writ petitioners in the batch of cases it is found that the other writ petitioners are power generating companies, whereas the petitioner is a Sugar Mill Company which also generates electricity from molasses. Moreover, the case of the petitioner along with the association of Bihar Sugar Mills Association was allowed by this Court by a judgment dated 16.09.2009, by which certain amendments in the Bihar Electricity Duty Act have been struck down but subsequently on an appeal filed by the State of Bihar in the Supreme Court, the Supreme Court has remanded the matter to this Court. For the aforesaid reasons, the present matter shall not be heard along with the other writ petitions.” 11 CWJC No 4300 of 2015 12 NTPC 13 CWJC No 17306 of 2014 B C D E F G H 294 SUPREME COURT REPORTS [2021] 9 S.C.R. A B C D E F G H

#13. On 14 December 2016,the High Court rendered its decision in the writ proceedings instituted by NTPC, holding that electricity duty cannot be imposed under Section 3 (1) of the Bihar Electricity Act on a power generation company supplying electricity to a licensee like the Electricity Board. The High Court’s decision was premised on two reasons. First, it relied on the judgment of this Court in State of AP v. National Thermal Power Corporation Ltd14 to arrive at the conclusion that it is beyond the legislative competence of the State to impose a tax on the sale of electricity which is not a sale for consumption. In this regard, the High Court observed that: “…the Apex Court has interpreted Entry 53 [of List II of the Constitution] to be read as taxation on the consumption or sale for consumption of electricity. That being the position whether the tax levied is under Entry 53 of List II as a tax on consumption or sale for consumption of electricity, or under Entry 54 of List II as taxes on sale or purchase of goods, it will make no difference since the goods which are to be taxed, that is, ‘electricity’ remains the same under both the circumstances and the levy can only be on the consumption or sale for consumption of electricity in terms of what has been laid down by the Apex Court in the NTPC’s case(supra). The distinction between the two entries in respect of electricity has been clarified in para 23 of the said judgment where it has been said that if the State Legislature chooses to impose tax on consumption of electricity it will not be possible to do so under Entry 54, because it does not provide for taxes on consumption whereas Entry 53 permits the same. Thus, the charging Section 3(1) of the Act when it speaks of levy of duty on either units or on the value of energy consumed or sold, has to be similarly read as the Constitutional Entry 53 providing the power to the State Legislature, to levy electricity duty either on the unit or on the value of energy consumed or sold for consumption. In the said circumstances, any sale of electricity which is not a sale for consumption would be beyond the purview of the State Legislature to enact and thus the charging Section 3(1) of the Act has to be read in the said light as levy of electricity duty for consumption or sale for consumption of electricity.” 14 (2002) 5 SCC 203; referred to as “State of AP’’ M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF BIHAR & ORS. [DR DHANANJAYA Y CHANDRACHUD, J.] 295 Second, the High Court observed that in terms of the provisions of the Bihar Electricity Act, a power generation company is liable to pay duty only if it is selling electricity to the consumer, as defined in the legislation. The High Court held that: “We are also in agreement with the submission of learned counsel for the petitioners on the basis of the provisions of Section 3(1) read with Section 2(b),(d) and ( ee) of the Act. It is evident from the definition of value of energy in Section 2(ee) which is the computation provision brought in by amendment, after the earlier provisions and notifications had been struck down by the Court as providing no guidelines, that it provides for only two type of cases under sub-clause (i) that is, firstly, energy sold to a consumer by a licensee and, secondly, energy sold to a consumer by a person who generates energy. Since we are not concerned with the 2nd type of case mentioned in sub-clause (ii) with regard to the person generating energy consuming the same, the only circumstance under which a generation company like the petitioners or any other person who generates energy would be liable for payment of electricity duty would be when it sells the energy, to the consumer itself. The petitioners are evidently not a licensee in the matters in hand, they are certainly not selling energy to the consumer; rather they are selling it to the BSEB, which is a licensee under Section 2(d) and which in turn sells the energy for ultimate consumption. … Therefore, even on the ground of the applicability of the charging provision it has to be held that the charging provision under Section 3(I) read with the definition of ‘consumer’, ‘licensee’ and ‘value of energy’ as provided in the Act cannot be used to levy any tax on a generating company supplying energy to a licensee like the Electricity Board as in the present matter, as no tax can be computed in their cases.” Aggrieved by the judgement of the High Court, the respondents filed special leave petitions15 before this Court. By an order dated 3 July 2017, the special leave petitions were summarily dismissed by a two- judge Bench of this Court. 15 SLP (C) No 17231-17238 of 2017 A B C D E F G H 296 SUPREME COURT REPORTS [2021] 9 S.C.R.

#14. By its judgement dated 18 September 2017,the High Court dismissed the writ petition instituted by the appellant, holding that the liability of the appellant to file returns would require a factual determination on the nature of the supply of electricity made to BSEB. It further observed that the appellant should exercise the alternative statutory remedy provided in the Act. The High Court observed: “Having considered the contentions we find the question as to whether the petitioner itself liable to file the return and what is the nature of supply made by the petitioner to the Bihar State Electricity Board and the nature of transaction is a dispute which warrants consideration based on enquiry of facts and once there is a statutory remedy available to the petitioner we are not inclined to allow this petition. However, granting liberty to the petitioner to take recourse to the remedy of appeal we dispose of the writ petition.” The judgment of the High Court has given rise to the present appeal. Notice was issued on 4 January 2018. Submissions of the Parties

#15. We have heard Mr SK Bagaria, learned Counsel appearing on behalf of the appellant sugar mill and Mr Saket Singh, learned Senior Counsel appearing on behalf of the respondent State. On behalf of the appellant, the following submissions have been urged: (i) On a combined reading of Section 3 with Sections 2(b), 2(d) and 2(ee) of the Act, the sale of electricity by a generator to a licensee would not attract the levy of tax for the following reasons: (a) Section 3 of the Act is the charging provision of the statute which states that tax shall be levied either on the units or on the value of the energy consumed or sold; (b) Section 2(ee) defines the phrase ‘value of energy’ as the charge payable by the consumer to the licensee or by the consumer to the person who generates the energy; (c) Section 2(d) defines the term ‘licensee’ to include the Bihar Electricity Board; A B C D E F G H M/S MAGADH SUGAR & ENERGY LTD. v. THE STATE OF BIHAR & ORS. [DR DHANANJAYA Y CHANDRACHUD, J.] 297 (d) The phrase ‘value of energy’ states that it is the charge payable by the consumer to either the licensee or the generator. Since the BSEB is a ‘licensee’ under Section 2(d) of the Act and not a consumer, the sale by the generator of the electricity (the appellant ) to the licensee (BSEB) is not covered in the phrase ‘value of energy’ and is not taxable under Section 3 of the Act; BSEB pays electricity duty for the electricity sold by it to consumers, including the electricity supplied by the company to the Board. The levy of tax on the electricity supplied by the company would thus amount to double taxation; The question of filing a return under Sections 6B(1) and 5A of the Act does not arise when the appellant is not liable to pay the tax; (ii) (iii) (iv) Without prejudice to the above submissions, even if it is conceded that the State has the power to levy tax on the supply of electricity by the generator to the licensee under Section 3 of the Act, the Government of Bihar has not exercised its power since under Section 3, a notification must be issued for specifying the rate of charge. The notification issued on 21 October 2002 by the State Government is the only notification providing the rate of duty on ‘consumption or sale of electricity’. The notification states that for the electricity energy that is consumed or sold for any purpose other than irrigation, the rate of duty shall be sixper centum of the ‘value of energy’. However, the definition of the term value of energy only includes supply to the consumer; (v) There is no dispute on facts. BSEB is a licensee and not a consumer. If power is exercised without jurisdiction, then the rule of alternate remedy will not apply (relied on Raza Textiles Ltd. v.ITO16, State Trade Corporation of India Ltd. v. State of Mysore17and Radha Kishan Industries v.State of Himachal Pradesh 18). Since the power